Today's labour market figures are encouraging, but the wider economy is unsupportive and outlook remains weak - ITEM Club
Nida Ali, economic advisor to the EY ITEM Club comments on today’s labour market figures:
- Today’s figures are encouraging and suggest further stabilisation in the labour market
- However the wider economy is still unsupportive and the outlook remains weak
- Exceptionally sluggish wage growth, coupled with higher oil prices imply that consumers' real incomes will keep declining
“Today’s figures suggest further stabilisation in the UK labour market. Unemployment on the ILO measure edged down in the three months to February, while the rate of increase in the claimant count in March slowed further, which is certainly encouraging.
“However with the wider economy remaining unsupportive, the outlook for the labour market is still fairly bleak. Although we are likely to avoid a technical recession with GDP expected to post a small increase in Q1, there is little momentum in the economy to create more jobs. Unemployment is expected to continue edging up in the coming months, peaking only by the beginning of 2013, before it starts drifting down gradually.
“Wage growth is still exceptionally sluggish. Consumers have been facing declining real incomes for a long time now and, given the weak trend in pay growth, will continue to do so for some time yet. This will be further exacerbated by the recent oil price developments, which suggests that inflation may remain higher for longer.”